Legislative Council

LC Paper No. LS153/98-99

Paper for the House Committee Meeting
of the Legislative Council
on 23 April 1999

Legal Service Division Report on
Protection of Wages on Insolvency (Amendment) Bill 1999

Object of the Bill

To improve the ex gratia payment to employees who are owed severance payments by their insolvent employers.

LegCo Brief Reference

2. EMB CR 7/3051/82 XVIII dated 9 April 1999 issued by the Education and Manpower Bureau.

Date of First Reading

3. 21 April 1999.


4. At present, an employee who is owed severance payment by an employer who is insolvent may apply for ex gratia payment from the Protection of Wages on Insolvency Fund (the Fund).

5. However, the ex gratia payment payable is not to exceed the aggregate of $50,000 and half of that part of the employee's entitlement to severance payment in excess of $50,000.

6. The employee's entitlement to severance payment is calculated in accordance with section 31G of the Employment Ordinance (Cap. 57) and depends essentially on his last full month's wages for every year of his employment.

7. The Bill proposes that where the wages of the employee have been reduced in the 12 month period before his dismissal or being laid off, his entitlement to severance payment for the purposes of ex gratia payments from the Fund shall be calculated in such a way that his wages before the wage reduction will instead be taken into account or in accordance with any written undertaking by the employer, provided that it will be more favourable to the employee.

8. There will also be a transitional provision to allow an oral undertaking made before the commencement of the Bill after its enactment to be validated if the employer confirms it to the employee in writing within 2 months of the commencement.

Public Consultation

9. According to the Administration, both the Protection of Wages on Insolvency Fund Board and the Labour Advisory Board have endorsed the proposal.

Consultation with LegCo Panel

10. The LegCo Panel on Manpower was briefed on the proposals on 23 December 1998.


11. Members may find it necessary to take a closer look at the policy aspect as well as the technical details of the proposal by setting up a Bills Committee.

Prepared by

CHEUNG Ping-Kam, Arthur
Assistant Legal Adviser
Legislative Council Secretariat
19 April 1999